DOLLARS VS. SENSE: GROW REVENUE OR CUT COSTS?

When your organization is facing financial difficulties, is your first instinct to reduce spending, or is it to find ways to increase and diversify revenue?

While there’s a limit to how much expenses can be cut, there’s theoretically no limit on how much revenue can be increased. We may often be better off by focusing our time and energy on driving more revenue, rather than on searching for ways to reduce expenses.

Revenue Diversification

Diverse revenue streams are important so as not to become overly reliant on any one funding source. In the case of not-for-profits, such diversified funding sources may include:

Membership fees

Conference or convention revenue

Sponsorship revenue

Advertising revenue

Grants and donations

Fees for services rendered

Revenue diversification results in greater stability in the organization, and mitigates the risk of over-dependency on a single funding source.

Pricing Optimization

Pricing of each product and service should be regularly reviewed and optimized. If you are an association, are your membership fees reviewed annually and adjusted for inflation? Are members financially incented to renew their memberships on time? Are conference registration fees and exhibitor fees competitively priced? Do you use dynamic pricing (changing pricing in response to market demand) for event registrations?

Is a Silent Partner Taking a Share of Your Revenues?

Your credit card payment provider may be taking a significant percentage of your revenues. When credit card payment is accepted, 3% or more of revenues may go directly to the merchant service provider. Fortunately, there are now payment card providers (such as PandaPay) charging much lower fees, allowing you to retain more of your hard-earned revenues.

Professional Financial Oversight

To help identify new funding sources and drive revenue growth, consider investing in a virtual CFO – a professional accountant with experience working with organizations in your sector. OTUS Group virtual CFO’s have worked with numerous not-for-profits to help them grow and diversify their revenue streams.

While cost control is important, there is a limit on how far costs can be cut. Organizational growth ultimately depends on revenue growth, ideally diversified across multiple sources.

Find out more about revenue diversification – call me and we can have a conversation. We can also talk about improving operating efficiency, reducing costs and strengthening your organization. Reach me at 613-727-1230 ext. 212 or rmacneill@otusgroup.com

Richard MacNeill, FCPA, FCMA, CMC, Dipl. T. is a partner at OTUS Group, a team of advisors to business, government and not-for-profit organizations.

Holding Certified Management Accountant (FCMA), Chartered Professional Accountant (FCPA) and Certified Management Consultant (CMC) designations, Richard is also a graduate of the British Columbia Institute of Technology, holding a diploma in Computer Programming and Systems Technology.
Outside of work, Richard enjoys spending time with his wife and three children, and training for obstacle races.